Federal Housing Finance Agency Imposing Refinancing Fee on Physician Mortgage Loans

Physician Mortgage Loans

The Federal Housing Finance Agency announced they will begin imposing a 0.5% refinancing fee beginning on December 1st, 2020 on physician mortgage loans and other mortgage loans. Initially this fee was supposed to begin on September 1st, 2020 but was delayed due to Covid-19 hardships.

New home purchases will not be affected by this since refinances are seen as riskier to banks because they’re assessed on appraisals, not actual home values. This new fee will only apply to Freddie Mac and Fannie Mae loans, which account for about 70% of the market. Furthermore, the latest data shows that around 64% of physician mortgage loan applications are refinances according to data from the Mortgage Bankers Association. This is not the first time this has happened if you recall 2008 when they imposed a similar 0.5% fee. According to Fannie Mae, this helps mitigate the risk they believe they’re taking due to Covid-19 “Market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae.” Freddie Mac calls their new program the Market Condition Credit Fee that was implemented “as a result of risk management and loss forecasting precipitated by Covid-19 related economic and market uncertainty.” The Federal Housing Finance Agency is forecasting a loss of around 6 billion due to default/forbearance so you can see why this fee is being implemented. While most mortgages take around 30-45 days to close, some banks will allow you to lock in the rate as long as you do that before December 1st, 2020. One caveat regarding the fee: this does not apply to any mortgage under the amount of 125k. The average consumer should plan to spend around $1,400 more due to the refinancing fee and could potentially be significant especially in states with higher property values. If you were already considering refinancing your physician mortgage loan, this may be a good opportunity to start today and get the process going. If you have any questions, contact a 25 advisor.

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